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Ever heard of the Double Irish and a Dutch sandwich [wikipedia.org]?The City of London [wikipedia.org] has established [theguardian.com] a world-spanning network of tax heaven states, mostly consisting of former parts of the english empire. Big corporations use this system to not pay taxes, and the sums involved exceed 1$B by far.

Property only exists by virtue of the law which exists thanks to taxation

Property exists by virtue of a person claiming and controlling it by fighting off those who would take it away. All the law does is make it so the owner doesn't have to physically defend it all the time.

Google has played the same tricks in the UK. Google claims that the sales are made in Ireland, while employing many people in the UK whose job titles includes sales. I expect there are Google employees in France and UK (and most other European countries) who get sales commissions for sales "made" in the Ireland.

The problem with sales tax (VAT) is that it taxes the poor more than the rich because the poor tend to spend a greater proportion of their income. It is also quite a burden to administer for companies and government. It is also an inefficient tax for states with welfare - government gives you money and then you give a large portion of it back again.

I don't have a solution though, even though it is something I think about often. But it seems to me that what we really need is for some way to experiment with widely different tax regimes. But what country is going to be willing to suffer negative consequences of doing so?

No, it doesn't work that way. If a company buys a 747 then they pay the VAT. If they upgrade it and resell it, the full VAT is passed along to the buyer. In the end, whomever ends up with the goods (the consumer), ends up paying 100% of the VAT tax.

No, it will hit the poor harder. It doesn't matter the amount of money, it matters the proportion. If a less well off person spends 100% of their earnings on rent, food, water, etc. then they'll be taxed the full amount, and for the basics they have no choice. A very well off person won't be spending 100% of their income even if they buy that luxury yacht, and they don't even need that yacht so they could choose not to make the purchase and invest instead.

(Buffett famously made the observation that he pays less tax on his luxury Malibu vacation home then most middle income people pay on their family homes

That is because of Proposition 13, which was a sledgehammer device used to crack a nut (people on fixed incomes seeing their property taxes skyrocket as property valuations skyrocketed). It doesn't have much relevance outside California.

In cases like this, I wonder about just moving to a VAT entirely and dispensing with income taxes.

In a perfect world where companies paid what they earned, an income tax would be better in theory, as consumption taxes tend to slow down purchasing and movement of money.

However, in the real world, we read all the time about the stashing of income. A VAT is better because it is a lot harder to get around (as of now... I'm sure there might be loopholes.)

tl;dr... Income can be hidden. Hiding that factory, Lear Jet, or Maybach, not so much.

VAT, or sales taxes don't work on a level playing field. If you make a low wage the vast majority of your money is spent on housing, then on the repeat purchasesables. Food, household items like garbage bags, dishsoap, clothes, and possibly fuel.

Most of your spending is taxed, a decently high rate. When you make 10-15k a year 15 precent or so sales tax hurts. A lot.

On the other hand, if you make 10 or 20 times that much you don't spend 10 or 20 times as much on the same things. You'd spend a little more. H

Why shouldn't they use "tricks" to avoid evil behavior by various governments. Google owes France $1 billion!? Really? For what? For creating jobs in France and for benefiting French people through its free products for which the French government has not contributed 1 cent?

You could make the same argument about any tax levied by any government anywhere.

there's a difference between structuring your business to avoid taxes, and not paying taxes that you owe. Goog is the latter. but I feel bad beating up on them lately, especially after the moto thing and their last quarterly report. desktop revenue down 9% even though clicks are up 26%...

Goog is the latter. but I feel bad beating up on them lately, especially after the moto thing and their last quarterly report. desktop revenue down 9% even though clicks are up 26%...

For Google's case in particular, I also have to look at the services they've provided:

High-quality email with the holy grail of spam filtering

Basic office software in a browser

A standards-compatible browser under constant development

A phone operating system

Mapping, search, and everything else

Since these are provided free to everybody, isn't this a tangible public service? Sure, Google's users are the product, but if one considers these as analogous to services provided under a government's mandate to

If they don't like the laws the company is free to not operate in the country. If they choose to operate there they must follow the law. I have no sympathy for them, they knew what the deal was when they stablished there.

The problem is that they are following the laws in these countries. The governments have the legislative powers and have created tax systems that don't work under these conditions, but instead of fixing the problem, it's politically better PR to just blame the big organisations for having decent accountants.

In cases where that creates a hostile public feeling toward a company, that can be a surprisingly effective strategy -- certain businesses that operate in the UK have recently changed their accounting practices so they declare more taxable income in the UK -- but usually the amounts involved are relatively small, just enough to counter the bad press with a good soundbite about how many million they paid in tax last year -- and it doesn't really work on businesses that utterly dominate their industries and/or don't deal much with the average guy in the street anyway.

Sooner or later, these governments are going to have to get their act together and fix the broken system properly, but I suspect a lot of them are hoping the next election will come and go first so either they have some breathing room or it's someone else's problem.

The USA also has something called Alternative Minimum Tax. That is a rule that gets invoked when it looks like someone is trying to game the system. Essentially, it gives the tax service the power to impose a tax. France is doing the same thing.

errrr. The only reason why there is an alternative minimum tax is that the tax code is complex and is designed to be gammed - instead of a AMT we would be better off if we just simplified the tax code.

That will never happen. Since congress has the sole authority to set taxes, they realized way back that they can get a ton of leverage by negotiating for new tax rules. You want to push a new law through? Tax rule to grease the palms. McDonalds overcharged you for a Big Mac? Tax rule. Your best friend works in the Petroleum industry? Tax rule. It's 2PM on a Tuesday? Tax rule.
Hell, the taxes are so complicated, entire industries have grown around figuring them out - and they're actively lobbying to pre

You don't have any understanding of what is going on here shitbird. Read something before posting. Google is following the law

Some countries (I don't know if France is one) have tax laws stating that if transactions are structured in a particular manner for no reason other than to avoid taxation, the tax avoidance scheme is void. Problem is, laws like those are extremely difficult to enforce effectively and consistently.

Actually, it really appears that Google was blatantly NOT following the law.

Apple sells an iPhone and says X% of the value of it is for patents to be paid to an Irish company [or something like that], which is completely legal, even if it is also completely arbitrary [as Apple owns said patents] so they basically shift most profits out of the country. Everybody and their dog does this, Apple just headlines this because they are a relatively new company [vs say, petroleum companies] and they make highest amount of profit [or thereabouts] worldwide.

Google has a large office of employee's in France, that were involved with negotiating and signing advertising contracts with french companies, then claiming those contracts were actually signed IN IRELAND. This is the part that the tax collectors are taking issue with. To be legal and not have to pay taxes in France for those contracts, Google would basically have to close their french offices and get everyone to directly deal with their Irish division.

And I believe I saw a similar story about the UK also investigating Google doing this in the UK as well. And I'm sure all the other tax collection agencies in the EU have perked up their ears and started taking a look at this...

Google has a large office of employee's in France, that were involved with negotiating and signing advertising contracts with french companies, then claiming those contracts were actually signed IN IRELAND. This is the part that the tax collectors are taking issue with.

There are so many problems with this, where to begin?

Firstly, this is not some spontaneous action by a bunch of bottom rung tax collectors. Politicians in France got elected by promising things the country could not afford and have been despe

TFA says that the French government thinks they are not following the laws. It's a somewhat technical disagreement but as far as the French government is concerned the should have paid that money.

As it happens the EU is trying to sort this out. The proposal is for companies to pay corporation tax based on the percentage of business they do in each country. If 5% of Google's business is in France with French companies then they pay French corporation tax on 5% of their global profits. Doesn't matter where th

TFA says that the French government thinks they are not following the laws.

But which part of the French government? The implication is very different depending on whether we're talking about the legislative authorities, the tax collection authorities, or someone's PR department.

Of course some countries, most notably the UK, are against this because they like being tax havens.

I think you're confusing the UK with Ireland. Large international businesses are playing much the same games to avoid paying corporation tax in the UK as they are in France.

No, the UK likes being a tax haven as well. Here it is a little more complicated than Ireland. You have to take the head of HMRC to dinner and come to a gentlemen's agreement that you aren't going to pay, and little is done to enforce it. The government is generally speaking against clamping down hard to legal-but-immoral tax avoidance because it thinks companies will move outside the UK if it does.

If 5% of Google's business is in France with French companies then they pay French corporation tax on 5% of their global profits. Doesn't matter where they try to hide them, the bill is the same.

Wouldn't they just organize so that profits all accrue to a company that doesn't do business in France, thus giving Google 0 global profits? Isn't that what most global companies already do w/r/t to the US and the EU?

the first one is that the large US companies know that at some point they'll be able to get a tax holliday to rapatriate the cash they fleeced from foreign countries and stored in some tax haven.In theory you have to pay taxes somewhere overly simplifying the issues it means you pay where you are or where your customers are, but if you can hide the money from your customers tax authorities and then wait until your own tax authorities tells you fine, bring the cash we'll make y

There's a bit of corruption being uncovered in the ruling party in Australia this week. Turns out you can get a lot of access during a tendering process for a gift valued at $3000. It's a bargain since getting a Mayor to listen cost $5000.

This is not how the world works in the 21st century anymore. Of course, Google does have offices in France, but don't assume they coudn't just close them. The internet is a funny thing, it doesn't give a crap about arbitrary geographic borders. I provided you with content: my reply to your post, do I now "operate" in your country?

Google should just get the hell out of France.I can't imagine its profitable to put up with the French government bullshit. Besides, French citizens could still use Google services. No way would the French government be able to figure out how to block them.

In some countries, maybe there's some blame to be had for escaping taxes...but France is a whole other argument. I mean shit, 75% tax on the wealthiest has resulted in a lot of them just flat out leaving that country. It got so bad that their dear leader is now lobbying against his own tax plan; the same plan that put it there to begin with.

What do personal tax rates have to do with a corporation paying corporate taxes? There are no "75%" corporate taxes in France?

A corporation has a choice in whether or not to do business in a country. Google has no problem doing business in countries with regimes with a lot worse policies than a 75% top personal tax rate.

Sure, but Google (and others) are obviously trying to pass off work done in France (or other EU countries) as work done in Ireland, while the Ireland office obviously has very few staff and cannot possibly do all the work they are purported to be doing. This is a very obvious tax fraud and it is quite amazing that these mega corps think that they will get away with it forever. They should get audited and double taxed. Simple as that.

What do personal tax rates have to do with a corporation paying corporate taxes? There are no "75%" corporate taxes in France?

Technically true, and my point wasn't to say that corporations pay a 75% tax, rather my aim was to point out the biggest absurdity in their tax system in order to emphasize how bad it is. It is quite so bad that in fact that they are reversing course, which again I wanted to emphasize. As far as the 75% tax itself...the 75% figure cannot be taxed to individuals directly; I don't know exactly why, but apparently it's against their higher laws (constitution? I honestly don't know enough about French law.) Wha

Sorry, but that 90% figure is sensationalist and just another way to say "look, we're getting screwed by the 1% more than we used to! Torches and pitchforks now!" and ultimately isn't useful. Why? Because practically nobody ever paid 90%, and furthermore the rich paid less of a burden then than they do today. Why? The tax system worked a lot differently then. It was the top marginal rate on an income above $300,000 for single, $400,000 for married. In order to effectively be paying 90%, they had to make ove

There is a certain current of Americans who hate France and all things related to French culture (I know, it's ironic, but stick with me...). Usually they tend to be tea party or hard core conservative types.

I'm none of the above. My thoughts about France are probably the same as the typical British person's are (if you're looking for a comparison, anyways.)

I'm also fairly certain that the French hate Americans more than I hate the French.

You really want to know why Americans hate so much the French ? By the way it's the same reason the French hate so much the Americans. Because deep deep down where the sun doesn't shine, France and the US of A are the 2 sides of the same coin.

Because both countries have folks professing to hate the other country's culture while spending $$$ on the products of that country's culture?

Dear leader? The French president is more like Ronald Reagan than Dear leader lately.The 75% for income above one million euros (after deductions), was a symbolic measure as it concerns very few people and is still not applied. Just stuff waived around to get elected. Same president had pleaded to renogotiate the treaty on European Stability Mechanism, but didn't. Not a single point or comma was changed. Now this government will get us in the Great Transatlantic Market, or whatever it's called in which US corporations will dictate their laws to the countries and European Union, putting an end to national democracy.

Dear leader my ass! We're trapped, with a presidency and governnement that have "socialist" in name but are right-leaning collaborationists, more in the way of Tony Blair and Gehrard Schroeder.

For much of the 20th century, the United States has had >70% tax on the wealthiest as well, with at some point >90%. Apparently, that did not seems to hurt the US.

Not that various American ultra-rich folks are calling for higher taxes on the wealthy too. Instead, they get tax breaks.

A few rich people being a bit upset that their income from labor gets taxed heavily, which they don't feel because the vast bulk of their income comes from investment, won't hurt them. It's the desire to spend spend spend

the wealthiest has resulted in a lot of them just flat out leaving that country.

Which is why tax laws need a lot more international corporations.

Right now, the rich and the mega-corporations are turning countries into enemies that fight each other over "competitive" tax rates, when they should be allies fighting the tax evaders with criminal prosecutions.

It's just another trick to make you and me pay indirect subsidies to the rich. Even if you're anti-government, you can't deny a simple truth: Every $ that some rich dude or corporations evades in tax payment has to be paid by the rest of us instead.

I have no idea where you are getting that idea. http://en.wikipedia.org/wiki/T... [wikipedia.org] there is a 60% tax on inheritance but only if you are a remote relative. There are high income tax on very high income (41% top), and there is a very low tax on wealth (around a 1% if you are millionaire , and atround 2% if youa re over 10* millionaire). As for the article it does not speak at all about a 75% tax. As for the article, it was really written by an american "France is famous for its generous social benefits, somewhat relaxed work ethic" there are country (like germany, Sweden) which have as generous and as relaxed "work ethic". In fact I suspect the usage of the word "ethic" here as being american prejudice only.

In puritanical America, not being in the office for 10 hours a day, not taking less than one week of vacation (including sick days), not taking less than fifteen minutes to buy and eat lunch, is having a relaxed work ethic.

In some countries, maybe there's some blame to be had for escaping taxes...but France is a whole other argument. I mean shit, 75% tax on the wealthiest has resulted in a lot of them just flat out leaving that country.

You confuse taxes on individuals and taxes on companies, BTW the US top tax rate was very close to this until you elected a movie cowboy, I guess all the rich people where fleeing the US in the 60s 70s and early 80s....

The main reason BTW the government is trying to increase personal taxes is just because international (including very french ones) companies actually manage not to pay any taxes...

I would not be surprised if between most of the major corporations that they owe the French more than 50 billion. Hate to cheer for a tax office let alone a French one but what Google et al do tax wise is fucking appalling and needs to be cracked down on by EVERY government.

We have a good figure to start with: the share of GDP that goes to capital or labor. It moved a lot from the later to the former. Should we go back to 1980 values in France, workers (who cannot escape taxes as megacorporations can) would globally get a 195 billion euros bonus each year.

you didn't provide links verifying your points. without links it is too hard for the people who regularly get mod points to mod positive, because if you want a soap box on slashdot you should use their journal system. having read the definition of austerity measures it is clear that the usa is also using austerity measures... the world is a complex place, though.

"After the french government committed to economic suicide with austerity policies" http://en.wikipedia.org/wiki/Austerity [wikipedia.org] In economics, austerity describes policies used by governments to reduce budget deficits during adverse economic conditions. These policies may include spending cuts, tax increases, or a mixture of the two.[1][2][3] Austerity policies may be attempts to demonstrate governments' fiscal discipline to their creditors and credit rating agencies by bringing revenues closer to expenditures; they may also be politically or ideologically driven.

In macroeconomics, reducing government deficits generally increases unemployment in the short run.[4] This increases safety net spending and reduces tax revenues, partially offsetting the austerity measures. Government spending contributes to gross domestic product (GDP), so reducing spending may result in a higher debt-to-GDP ratio, a key measure of the debt burden carried by a country and its citizens. Higher short-term deficit spending (stimulus) contributes to GDP growth particularly when consumers and businesses are unwilling or unable to spend. This is because crowding out (i.e., rising interest rates as government bids against business for a finite amount of savings, slowing the economy) is less of a factor in a downturn, as there may be a surplus of savings.[5][6]

Do we need references to claim that austerity never works? Do we have examples where it was a success?

My understanding of the phenomenon is that common people understand it as a wise measure they adopt when they have budget problems: less expenses, more income. But that thinking miss the point that a state is not an individual, and has several special capabilities which can help here: creating money, increasing income, and refusing to pay the debt without seeing its belongings seized.

In the short term(a couple of years like what the E.U. has been going through so far)? Probably not.

Over decades? Absolutely.

Gross and unsustainable overspending over the long term is a fantastic way to either default on debt, end up having to hyperinflate it away, or dramatically bleed the country's wealth out of said country. Those are not good things.

Sure current situation is not good, but you have to look at its source.

Between 1945 and 1973, France's state deficit is covered by debt owned by nationals, and money creation by the Banque de France. The debt remain low despite an important public spending.

After 1973, money must be borrowed on international markets. The debt increases since that time, and no public spending reduction managed to fix that. And ironically, the whole debt today is roughly the sum of debt interests since 1973.

Keeping money is tax havens makes paying bribes in tax havens with secret bank accounts real easy. Politicians collect the bribes by going on luxury holidays and spending up big on 'souvenirs' which they bring back with them to pay for corrupt legislation, in corrupted democracies all over the globe. Many corrupted democracies conspire together to keep tax havens alive, rather than actually doing anything about it. The top dog in corruption is of course the US, which then uses it's economic and military po

Giving the benefit of the doubt, and assuming this a genuine question and not a troll...

The problem is that it is surprisingly difficult to objectively distinguish between legitimate activities in an international business that operates in under multiple tax regimes and the activities which are "obviously" just tax avoidance.

It's hardly a secret that some businesses set up a legal entity that is little more than an administrative formality in a country with a very low corporation tax rate, and then their legal entities in other countries with higher corporation taxes pay some sort of fees/royalties to their low tax counterpart, thus shifting the tax burden and saving them money (as well as changing which country is the beneficiary of the corporation tax they do pay).

The trouble is that the same rules about international payments and taxes have to cover businesses that really do operate, for example, a crucial R&D lab in one country (perhaps with a good reason, such as having close ties to a good university nearby) but still sell the end product to customers internationally. More than that, you also have to allow for the fact that it might be two completely separate legal entities doing that, which may or may not be owned by some of the same interests. After all, if a business in one country spends a lot of time and money hiring smart people to design products, but then sells the IP rights to completely independent manufacturing businesses in other countries that make and sell the physical products, I don't think many people would argue that it's silly to have the money for the rights shifting across international borders back to the people who did the research, and for each individual company involved to pay the appropriate tax in their own country on the money they make in that country.

So where do you draw the line, and on what basis? After all, the businesses in question almost certainly do still pay substantial amounts of money to the countries where they really are selling things, such as sales, property and employment taxes. The "obvious" thing to do is to adjust the tax rates so corporation tax is universally low and more government revenue comes from these other forms of taxation that can't be so readily shifted, but that has a lot of knock-on effects for your entire national tax system, and it's also susceptible to various other kinds of manipulation unless there is a lot of international co-ordination to mitigate those dangers. And remember, the people who are making all this money typically have a lot more to spend on professional tax advice -- and get excellent returns on that investment -- than the governments in question have to spend on challenging them in extended tax-related lawsuits that will drag on for years at great cost to all concerned.

I think there is sufficient public opinion turning against the more egregious examples of corporate tax avoidance now that we really will see such international co-ordination starting to get results within the next few years. France is definitely not the only place concerned about this, at either government or guy-in-the-street level. But for now, the above is (a grossly simplified explanation of) how they get away with it, and why it's neither breaking any laws nor easy to make laws it would break without unintended and potentially very nasty side effects.

But a revenue tax would stop all manners of shady profit shifting and hiding.

There is already a tax on revenue. It is called VAT [wikipedia.org] and has its own tax evasion problems.

Doing a revenue tax in any other way than as a value added tax will immediatly give you massive vertical integration in the industry as companies not producing their own intermediate goods indirectly have to pay "revenue" tax on them with no way of deducing it from their own revenue tax. Thus you end up with more "too big to fail" companies.

What you're describing is exactly the "obvious" solution I mentioned: shift the tax burden from corporation tax (tax on profits) to alternatives such sales tax (tax on revenues).

I think eventually this will be the logical conclusion to the problem of international tax shifting, but it's not something you can just change overnight. Sales taxes are messy already, with their own set of complicated rules to figure out the place where a sale is deemed to have taken place.

If you tax revenue then you would disadvantage small buisnesses who do one stage of the production process and give a big advantage to large companies with the resources to vertically integrate so the revenue tax is only paid once.

You would also put your companies at a massive disadvantage against foreign companies operating in areas without a revenue tax.

No, Google is an Irish company. If you look at which of the many companies that comprises Google worldwide, it is Google Ireland that does the majority of business with all the other countries in fact, this individual country's operation actually does all the selling of product in all the other countries too - that's why the tax bill is so low.See, if in France, a French salesman sells an advertising campaign to a French company, it is the Irish company that does it - otherwise the sale would (obviously) count as a French sale by French people to Frenchmen, and thus then be liable for all those taxes. But if the Irish company did the selling (nudge, nudge, honest) then the tax bill is massively reduced, especially as the licensing for this sale is managed by a different Irish company (only this one is registered in Bermuda.... hence the term "double Irish" - it requires 2 Irish companies, one registered elsewhere. These are Google Ireland Ltd and Google Ireland Holdings. One does all the sales, the other does all the licencing of IP to the other. Between them, I could happily say they do all of Google's business). A simple explanation [thejournal.ie]

That's the problem - not some 'grey area' where you have to draw lines over which company does business in which country, or some amorphous global company doing business everywhere. Google is an Irish company that just happens to have a "subsidiary" in California where the CEO lives.

So Google Ireland acts as a conduit - in 2009 it turned over nearly â8bn, yet profits were only â45m.

Maybe the US system of allowing related companies be treated individually for tax purposes should be scrapped. Then Google Ireland, Google Bermuda, and Google would be considered together for taxation by the US taxman...and the US would start to receive tax that is currently held outside US borders.

Google seems to be consistently dodging taxes. Shouldn't people go to jail for this?

If you set up rules by which something is legal, and someone jumps through the necessary hoops to follow those rules in order to pay the minimum possible taxes, the only thing you really have a right to complain about is the rules you've set up, not that people follow them in an optimal fashion.

France is (effectively) paying Google $266.5M to execute their contracts in Ireland rather than France, due to the 33.3% corporate tax in France, vs. the 12.5% corporate tax in Ireland.

There is a large group of people here that think that its not just moral, but a complete obligation, for governments to maximize their revenue. These same people are of course against corporations doing that very same thing.

That's a very "special" excuse for why it's perfectly fine to avoid tax, not put money in the collection plate etc. That "large group of people" is not allowed to get in charge for very long by a wide variety of mechanisms in any state. The equivalent of the United Fruit Company calls in their friends as soon as such a situation is threatened.

That's a very "special" excuse for why it's perfectly fine to avoid tax, not put money in the collection plate etc.

See, its commies (and I mean that) like you that are the real problem. You admit right here that you think there needs to be an excuse to pay as little tax as legally possible. Not only doesnt there need to be an excuse... its a no-brainer as to why there doesnt need to be one. Yet there you are with this theory that there must exist an excuse.